Q1 FY15 Investor Update Presentation

Transcription

1 Q1 FY15 Investor Update Presentation 1

2 HEG Limited - Profile HEG Limited (henceforth HEG) is a leading graphite electrode manufacturer & exporter HEG produces two grades of graphite electrodes - High Power & Ultra High Power - used in manufacturing steel through the Electric Arc Furnace (EAF) route Exports over 75% of its production to more than 25 countries of the world Diversified customer portfolio - ArcelorMittal, Nucor, POSCO, Emirate Steel Ind, Dongkuk Steel, Severstal, SAIL, Tata Steel, Jindal Group etc. Graphite electrodes manufacturing plant (capacity of 80,000 tons per annum) located at Mandideep in Madhya Pradesh - is the largest single-site it facility in the world Captive power generation capacity of 76.5 mw (thermal power - 63 mw & hydro power mw) 2

3 Global Steel Industry World crude steel production for the 65 countries, which produces 99 % of the alloy, during first 6 months of 2014 was up by 2.5 % to MT. Only in June, the production rose by 3.1% to 137 MT. TheEUshowedanincreaseof3.8% while Asia and North America reported growth of 2.9% and 1.7% respectively in the first half of South America and C.I.S. produced 1.0% and 2.6% less each. China s, which produces around half the world's steel, crude steel production for June this year was 69.3 MT, up by 5.6% compared to June According to the WSA s Short Range Outlook for 2014 and 2015, the global steel use will increase by 3.1% to 1,527 MT in 2014 following growth of 3.6% in In India steel demand expected to grow by 3.3% to 76 Million tons in 2014 against an actual growth of only 1.8% in

4 Graphite Electrodes Market & EAF Graphite electrodes find their biggest industrial use in Electric Arc Furnace (EAF) used in steel plants to melt steel scrap Graphite electrodes market has a current market size of over 1.11 million tonnes per year (US$ 3.5 billion); with the steel industry being the largest consumer The demandd for graphite electrodes is therefore sensitive to steel production via EAF Efficiency, feedstock flexibility and environmental advantages make EAFs a much more attractive investment for future capacities Share of EAF in the global steel production is currently around 30% EAF s share of crude steel making likely to grow exponentially and is estimated to overtake BOF steelmaking routes by 2030 Source: World Steel Association 4

5 o rise es ng to paciti eadin F cap ors le EAF Facto of Significantly less carbon emissions; Carbon emissions taxes & other restrictions imposed by govt. to discourage BOF steelmaking process Not reliant on dwindling coking coal supplies (unlike BOF); Rising steel scrap reservoirs (esp. from China) EAF Steelmaking Process DRI now becoming an economical feed; Makes EAF secured against volatility of steel scrap prices; Streamlines EAF steelmaking process; Opens up new commercial avenues Provides operational flexibility (considerably more than BOF) in economically & effectively managing output according to market pressures 5

6 Financial Snapshot (comparison quarter-on-quarter) In Rs. Crore (except EPS) Q1 FY14 Q1 FY15 Net Operating Income EBITDA* EBITDA Margin 17.26% 17.80% EBIT EBIT Margin 10.25% 12.23% Forex gains/(loss) (15.32) (2.15) PAT (9.32) PAT Margin EPS (2.33) * EBITDA includes Other Income & excludes Exceptional Items 6

7 Net Operating Income (Rs. Crore) Q Q Series1 7

8 EBITDA & EBIT MARGINS Note - EBITDA includes Other Income & excludes Exceptional Items 8

9 PAT and FOREX Income (Rs crore) 9

10 PAT Margin in last 6 Quarters s. Crore Rs 10

11 Segmental Performance Graphite Electrodes Graphite Electrodes In Rs. Crore Q1FY15 Q4FY14 Q3 FY14 Net Sales Export (% of sales) 83% 84% 80% EBITDA Margin 10.3% 9.7% 12% EBIT Margin 5.2% 6.6% 8.4% Capital Employed Capacity utilisation at around 70% during the quarter. Graphite electrode prices continues to beunder pressure. Needle coke price reduction, helped in maintaining margins Improved operating parameters, partly offset by unprecedented increase in domestic input prices. Repayment of long term loans improved capital employed in the business. 11

12 Segmental Performance Power Power In Rs. Crore Q1FY15 Q4FY14 Q3 FY14 Net Sales EBITDA Margin 44% 52% 51% EBIT Margin 38.1% 47.1% 46.6% Capital Employed Reduced net sales in Qtr1, as hydro facility is practically closed in this Qtr. Also Thermal generation is primarily il captive and related to Graphite volumes. Coal ratio, one of the best in the industry. Downward revision in allocation of linkage coal to the captive generators, affecting margins. 12

13 Overall optimism about the global steel industry would push the growth of graphite electrodes Industry outlook. e Ou utloo k Futur Robust order book position and relatively stable outlook envisaged in the year, to bring consistency in operations and improved performance. Pressure on Needle coke - the key raw material, continues and prices, likely to remain subdued in FY15. Closure of certain manufacturing facilities announced by global players, may have psychological positive effect in the market. Recent efforts of the Govt. towards resumption of mining activities in Iron Ore and Coal, and focus on infrastructure development likely to improve prospects, p for the steel Industry in India. 13

14 Thank You Mr. Raju Rustogi Chief Financial Officer HEG Limited Ph: Fax: